What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, also known as liquidation or straight bankruptcy, is the most common type of bankruptcy relief.
How it works? A bankruptcy trustee sells the debtor's (individual filing for bankruptcy) "non-exempt" assets and distributes the proceeds to creditors, even if the proceeds are only pennies on the dollar. Creditors will receive distributions in accordance with the Bankruptcy Code, based on a debt hierarchy.
Chapter 7 Bankruptcy Process
The process for filing for Chapter 7 bankruptcy often feels like a daunting task for those just starting to investigate whether it is the right process for them. However, with proper guidance from an experienced attorney the process of filing for Chapter 7 bankruptcy and receiving a Discharge can be a surprisingly simple process. Here is a step-by-step guide of what the average Chapter 7 debtor should expect when filing for bankruptcy with the Barbaruolo Law Firm.
1. The Initial Consultation
For the first meeting with our office, we typically ask prospective clients to bring in financial information such as paystubs, bank statements, tax returns, billing statements, vehicle titles, and other relevant legal paperwork. We will review your paperwork and discuss your situation with you to determine if a bankruptcy is right for you. This meeting takes about 1 hour
2. Preparing to File
Clients who decide to move forward with a bankruptcy will then take a mandatory credit counseling course. The credit counseling course can be completed either on the internet or over the phone and typically takes about 90 minutes. The Bankruptcy Code requires completion of a creditor counseling course before a Petition can be filed. The credit counseling certificate is provided to your bankruptcy lawyers by the company.
3. Signing & Filing the Bankruptcy Petition
Once our office has all necessary documentation and has been retained, we will begin drafting the Bankruptcy Petition. The Petition is the legal document that when filed will officially start the legal proceeding with the Bankruptcy Court. A client will then have a second meeting with our office to review the Petition for accuracy. Once satisfied that the Petition is truthful and accurate the client will sign it, and shortly thereafter our office will file it electronically with the Court. The bankruptcy is now commenced and you are protected from your creditors by the Automatic Stay
4. Financial Management Course
After your Petition is filed and ideally before your Meeting of Creditors (Step 5), each bankruptcy debtor must complete a second online course on "Financial Management", more commonly called the "second" or "post-filing" course. Just like the Credit Counseling Course taken earlier this is done on your own time and takes about 2 hours
5. Meeting of Creditors
Typically the only "court" appearance involved in a bankruptcy is with a Chapter 7 Trustee at what is known as the "Meeting of Creditors" or "341 Meeting." This meeting is a brief conference (only about 10 minutes) during which the Trustee asks a bankruptcy debtor questions to ensure that the bankruptcy Petition was prepared properly, and accurately describes the debtor's assets, income, debts, and expenses. Your attorney will be with you during this brief hearing to assist you when answering questions
6. Completing the Process
For most people the conclusion of the Meeting of Creditors marks the end of their active participation in the bankruptcy process. Most people can expect to receive their Discharge of Debts within about 8-10 weeks after meeting with the Trustee. Shortly after the Discharge is issued the Bankruptcy Court will formally close your case, and your bankruptcy is complete
How long does a Chapter 7 take?
The chapter 7 process generally takes about 4 months from the date of filing to the date the Court issues a discharge of debts. Once the petition is filed with the Court, the automatic stay- the bankruptcy protection - kicks in and most creditors can no longer take action to collect debts.
How often can you file Chapter 7 Bankruptcy?
A chapter 7 may be filed 8 years from the date of filing of the previous chapter 7. The 8 year count starts the day the petition for relief was filed (not the date the discharge was granted).
Do I qualify for Chapter 7?
Whether you qualify for chapter 7 depends on a few things. Have previously filed a chapter 7 petition within 8 years? Does your income "pass" the means test? The means test is a complicated formula that is based on your income from the previous 6 months, followed by another formula to assess your eligibility. The purpose of the means test is to limit chapter 7 filings and instead require a reorganization under chapter 13. However, it's best to consult a lawyer before taking the means test.
What does bankruptcy Chapter 7 mean?
Bankruptcy chapter 7 means a specific type of bankruptcy law under the bankruptcy code. It is sometimes referred to as a liquidation or a straight bankruptcy because the process is short and it does not include monthly payments like in a chapter 13 debt reorganization. A liquidation occurs when a bankruptcy Trustee seizes and sells (liquidates) any properties that are not either subject to a lien or are otherwise excluded from seizure.
What debts are discharged in a Chapter 7?
Most debts are dischargeable in bankruptcy. However, some debts that are not dischargeable include student loans, certain taxes, domestic support obligations and debts obtained by fraud.
Can I keep my house in a Chapter 7?
Yes. Depending on a few factors, it's likely that you will be able to keep your house in a chapter 7 bankruptcy. As long as the value of your house is less than the balance of any mortgage loan and the amount of the homestead exemption. However, you can still file bankruptcy and keep your home even if there is equity. Chapter 13 allows you to keep your assets and reorganize your debt.
Can Chapter 7 bankruptcy stop eviction?
Chapter 7 bankruptcy can stop evictions on a case by case basis. If you file for bankruptcy protection before the landlord obtains a judgment or eviction order, the bankruptcy "stay" will stop the eviction. If the landlord already has the warrant, the bankruptcy stay does not stop the eviction.